EU reportedly set to approve Hungary's Paks 2 project

EU reportedly set to approve Hungary's Paks 2 project
The EU has been probing Paks 2 for various violations
By bne IntelliNews July 26, 2016

The European Commission is set to approve Hungary’s project to expand its Paks nuclear power plant under conditions regarding supervision of the extended plant and the method by which it sells power, Hungarian press reported on July 26. A final ruling is expected around September,

Budapest tore up an international tender in January 2014 to hand Russia a €12.5bn contract to expand Hungary's only nuclear power plant. Market analysts, as well as the European Commission, however, have long questioned the fiscal wisdom and the legality of the deal.

The EU executive has launched investigations into the project, suspecting it does not comply with EU competition and state aid rules. According to unnamed sources quoted by, however, negotiations between the Hungarian government and the commission are now over, and Brussels is working on its final proposition.

The paper writes that the commission expects Hungary to meet two conditions before it approves the project. It will demand that all issues related to Paks 2 should be clearly separated from the current power supervision system and other energy sector policymaking. At the same time, “electricity generated by the Paks 2 plant should not be sold to state-owned grid operator MVM, but should be put up for sale through the power exchange”. 

The latter condition appears to relate to the EU's suspicion that Hungary's funding of the project constitutes some form of state aid, as well as concern - according to the sources - of power market concentration around MVM. The claims also suggest, however, that no public procurement violations have been found, although the EU has not commented at this point.

The sources claim, however, that the two probes on Paks 2 are now being handled as a single package. That means that should the EU approve the state subsidy, it will also rule favorably in the other case.

At the same time, speculation has grown that Russia may be seeking to pull out of its agreement to lend Hungary €10bn towards the cost. Other reports suggest Budapest is eying lowered borrowing costs on international markets.